In his Mathematical psychics, published in 1881, Edgeworth asserted that ‘the first principle of Economics is that every agent is actuated only by self-interest.’ This view of man has been a persistent one in economic models, and the nature of economic theory seems to have been much influenced by this basic premise.

In this essay I would like to examine some of the problems that have arisen from this conception of human beings. I should mention that Edgeworth himself was quite aware that this so-called ‘first principle of Economics’ was not a particularly realistic one. Indeed, he felt that ‘the concrete nineteenth century man is for the most part an impure egoist, a mixed utilitarian.’ This raises the interesting question as to why Edgeworth spent so much of his time and talent in developing a line of inquiry, the first principle of which he believed to be false.

The issue is not why abstractions should be employed in pursuing general economic questions — the nature of the inquiry makes this inevitable — but why choose an assumption which you yourself believe to be not merely inaccurate in detail but fundamentally mistaken? As we shall see, this question is of continuing interest to modern economics as well.